Ideas from Fast Money (CNBC) 12-26-2007

I am looking for ideas from different sources including money shows on CNBC. Some of the ideas worked for me in the past (thats why I keep on recording and watching them). They talk about so many stocks each day and its not practical for a home gamer like me to act upon every trade recommendations, but I certainly look at them (Charts, news, sector analysis, and quick fundamental analysis etc. ) to validate the ideas. For example, shorting MBIA (MBI) was an idea I picked from this show and I did that over and over, made money every time. On their Wed. Dec. 26th show they talked about so many sectors and stocks, I am putting some of the stocks on my radar now. Looking into SHORTING (buying PUTS) on some (On rallies or bounces) and Buying the ones from the long side trades on pull-backs.
SHORT LIST: Some retailers like Big Lots (BIG), Family Dollar Stores (FDO) and Mens Wear house (MW), And for 08 SHORT List look into some Real estate stocks like IYR and SPG.
LONG LIST: Agrium (AGU), Master card (MA) and Solarfun (SOLF -- very risky, but when I find some cash to burn, I may speculate on this one, I may get lucky)

Can Cummins, Inc stock grow 113% in 2008?

Cummins, Inc (CMI) is up 113% in 2007, certainly its a hard act to follow and maybe not reasonable to look for such growth in stock price every year. I really don't know the answer but I think the growth story remains intact and we should see some price appreciation in upcoming year. I say $140 is not far away and would be the next stop and maybe higher in next few months. I looked up some estimates from Yahoo Finance today which are very encouraging. They have a 2: 1 split coming on January 3rd and Dec. quarter announcement in Feb 1st.
EPS This Year: $7.52 EPS Est for 2008 is $9.14, with 21% growth and PEG at 0.81, I say this stock is trading cheaper than what It should be in near future. CMI stock appreciated 113% vs. SP500 is up 5.61%, Trailing PE: 17.41 and Forward PE: 13.84. CMI is competing with Caterpillar (CAT), Its PE is slightly higher than CAT and CAT's PEG is is even lower (0.78) than CMI, maybe CAT is also not a bad bet either.

How bad it can get for Hotels & Motels

SHORT Marriot (MAR): I was searching on the sectors which suffered the most on Thursday and Friday of last week, and beside the usual suspect (financials and ban related sectors and Home builders) the recent declines in Hotels & Motels sector (going to the bottom 10 percentile of the market from 20th place last week) caught my attention. Many names in this sector but wanted to pick the one which at least has enough volume trades. I picked Marriot (MAR) which is at its new 52 weeks low on Friday. MAR dropped 6.8% on 2.5 times normal volume on Friday, its PE is now 17.4. I am focusing on this group for now, and use any jump in stock prices (or dead-cat-bounces) as selling opportunity (i.e. buying PUT's, I never really short any stocks). Over 8000 contracts of January 30 Puts, traded on Friday (last traded at $0.90). Another stock in the same group is Starwood Hotels & Resorts Worldwide Inc. (HOT) , which dropped 5.7% on Friday on twice normal volume and hitting a new 52 weeks low (its PE is now 16.8). On the long side looking into buying call options on Ag. issues or Ag. machinery like DE. There is a good post at: http://tomorrowsnewspaper.blogspot.com/2007/12/agricultural-bull-market_15.html on CF.

Speculative Buy: Flextronics International Ltd. (FLEX) was featured (talked about) by Jim Cramer on Friday (Dec 14th 07) as being number 2 player in EMS group (Electronic Manufacturing Services), their PEG is under 1 with 26% growth (you can check exact numbers in Yahoo Finance) and it seems like an opportunity to buy something cheap in 2008. I am looking into January 2009 , strike: $12.5 LEAPS, last trade on Friday was $1.75.

Update on Iron & Steel group: I didn't trade X or PKX as I checked my facts when stocks dropped sharply. Usually I use the pull-backs to load up on the stocks on my buying list, but in this case the news were not very favorable at least for now, there seems to be slow down in orders from China and other buyers are waiting for more discount on Iron core. So my catalyst for this trade is vanished (for now).

Go with best-of-breed in Iron & Steel

Couple of stocks shine, in absolutely disastrous market we had for the past couple of days. US Steel Co. (X) and Pasco Ads. (PKX). The sector was among the top 10 percentile of the market for long and higher demand for infrastructure (especially in China) drives these stocks higher. Of course defensive plays (recession-proof stocks) such as KO, MO, PEP, CL, PG are back into play and Financials remain the best SHORT bet till the next rate-cut at least (Sold C calls and buying MBI Puts again, what can I do things changed, bets are off) .. Well maybe too soon to say that. I am not saying everything is bad, certainly some tech. stocks, and many stocks in Oil, Gold, Ag. and Infra structure may be good (especially the ones with less dependence to US economy), too timid to SHORT LEH or GS but they may go down now, I stick with MBI , MTG and PMI (for my SHORT candidates). In Hi tech. INTC, AAPL, GOOG (Internet-Ad), CSCO, JNPR.

Waiting Feds decision

Street expects .25-.50% drop of the key interest rates, I couldn't get myself to place big bets prior to the feds meeting. But since I am speculating a positive reaction to the rate cut, I bought some SIGMA January 75 calls (Sigma up 1.76 today), And for the most part waiting to see the market reaction. Investors (hedge Funds and money managers) are anticipating the cut, and market has been up since most of the governors hinted to the rate cut. I think with the rate cut my Citi bank calls should do well. On the Tech side, I think GOOG , AAPL will do well and for now I dropped RIMM from my list. Game publishers like GameBoy (GME) and Thq Inc (THQI) should do well too. I will be buying THQI soon and looking into buying puts on the discount online retailer OverStock.com (OSTK) . OSTK dropped 22% on 4 times average volume after it warned about upcoming quarter's result. I am going to wait for stock to gain some lost points on overall market move to the up-side and when it gets to $21 range then pull the trigger and buy Jan or Feb 20 Puts. OSTK has some near term support around 17.5 and then $14. I did not get into FNM and FRE. I will perhaps stay with Citi group (C) for a while as my single entry in recovering financial sector, and avoid housing stocks for a while. Hard to find an entry point to buy AAPL, or GOOG but they make sense.

Overstock.Com Inc (');" onmouseout="hideddrivetip();" symbol="OSTK">OSTK) Optionable Last: 18.74 Chg: -5.10 Chg: -21.39% VV%Chg: +290.83% After Hours Data (12/10 6:33:06 PM): Last: 18.70 Chg: -0.04 %Chg: -0.21% Volume: N/A

Morningstar shines brighter than ever

Morningstar, Inc. (MORN) provides independent investment research to investors worldwide. It offers Internet, software, and print-based products for individuals, financial advisers, and institutional clients, as well as asset management services for advisers, institutions, and retirement plan participants. The list of 52 weeks highs and low provide buying as well as selling candidates (from time to time). I would say there might me some pull-backs in MORN or in the overall-market, more bad economic news makes the markets more volatile, but isn't that we all hope for?! More bad news equates to greater chance for Fed cut, Fed cut means sharp spike in stock prices!
EPS this year at $1.56 and Next year at $2.02, almost 30% growth one could expect the prices falls somehwere between 1.5 times to 2 times growth rate, of next years earnings: $90-$120.
This stock paid its investors almost 80% return this year, I am not expecting the same performance next year, but nice uptrend pattern is intact, higher highs and higher lows, and nice gap-up just a few days ago, should grab our attention and presents as a nice buying opportunity.

UPDATE 12/5/07: Look into buying SIGMA on pull-back

XLF Got a shot in the arm from Mideast Oilers and Fed showed concern for weak economy

By now we all know about 7.5 billion dollars investment from UAE in Citi group and Feds governers giving speeches on their concern for weak economy in the coming year. I am personally hurt because of 6 point jump on MBI on Friday and willing to take my loss here and move on. Certainly not ready to go back and buy any of the mortgage insurers, REITS or Home builders, and actually staying away from them, I am willing to buy Citi group , Fannie Mae (FNM), or Freddie Mac (FRE), They were all up in the past few days and hopefully we get a pull-back on these stocks soon. FNM and FRE where up about 18% on Friday and C is up 11% since the news of the new investment. Although I missed the 11% move in Citi in the past week I like to think of it as a $53 stock on sale now so its not too late to go long C.